Phagu Mal Rattan Chand and Another vs Union of India (UOI) and Others

M.A. Shah, J.—This writ petition arises out of the proceedings allegedly taken by the respondents against the petitioners under the

provisions of the Gold Control Act, 1968 (hereinafter called the Act). The petitioners have challenged the order of seizure of the Gold Ornaments

weighing 244.750 grams ordered to be confiscated & imposition of a penalty of Rs. 2,000/- as stood modified by the order of respondent No. 1

by partly allowing the revision of the petitioners by order dated May 16, 1981 and in lieu of confiscation releasing the ornaments on payment of a

fine of Rs. 7,500/-.

It is stated in the petition that petitioner No. 1 is a partnership concern and a licensed dealer in terms of the Act; whereas petitioner No. 2 is one

of the partners of the said firm. On November 3, 1973, the Central Excise Intelligence and Preventive Officers headed by an Inspector visited the

business premises of the petitioners situate in Jain Bazar Jammu. On physical verification of stocks, the said officers seized sixty pieces of gold

ornaments weighing 244.750 grams (in Gross), in excess of the recorded balance on the alleged violation of the provisions of the Act. It is further

stated that on February 12, 1974, a show cause notice was issued to the petitioners by Assistant-Collector, Customs and Central Excise,

Srinagar, Respondent No. 3, alleging that the petitioners had been guilty of violating the provisions of sections 8, 33, 36 and 55 of the Act. They

were, therefore, called upon also to show cause as to why the ornaments seized be not confiscated u/s 71 of the Act & the penalty in terms of

Section 74 be not imposed. The petitioners replied the said notice attacking the seizure as well as the allegations made against the petitioners in the

said notice of show cause and denied that they have committed any violation of the sections shown therein.

The Assistant Collector, Customs and Central Excise, Srinagar respondent No. 3 by his order dated April 30, 1974 directed the confiscation of

the ornaments seized & imposed a penalty of Rs. 1,000/- upon the petitioners in terms of Section 74 of the Act on the strength of the alleged

statements of the owners of the ornaments recorded behind the back of the petitioners. On appeal against the said order to respondent No. 2 by

the petitioners, the same was accepted by order dated December 23, 1975, who directed that the proceedings leading to the passing of the final

order be conducted de novo. On receipt of the file, respondent No. 3 by a notice dated March 22, 1976 purported to level a further allegation

against the petitioners alleging violation of the provisions of the Identification of Customs Rule 1969 besides the provisions of the Act. The said

notice was also contested by the petitioners alleging that the show cause notice issued amounts to fresh charge and is beyond the scope of the

directions issued by the Collector while remanding the case for de novo enquiry.

It is further alleged that respondent No. 3 by his order dated September 29, 1976 in gross violation of the directions of the respondent No. 2

arbitrarily and unilaterally passed the order confiscating the ornaments and enhanced the penalty to Rs. 5,000/-. Against the said order, again an

appeal was preferred by the petitioners to respondent No. 2, who by his order dated April 7, 1977 upheld the order passed by respondent No. 3

and rejected the appeal. Being aggrieved against that, the petitioners preferred a revision as provided under the Act to the Central Government,

Respondent No. 1, which by its order dated May 16, 1981 disposed of the revision upholding the orders passed by respondents 2 & 3 and

directing that the seized gold ornaments be released on payment of fine of Rs. 7,500/- to be paid by the petitioners and reduced the penalty to Rs.

2,000/-. It is further alleged that because there was a great pressure for the return of the ornaments by the customers they paid under protest the

fine of Rs, 7,500/- and got the ornaments released & filed this writ petition challenging the order passed in revision as well as those passed by

respondents 2 & 3 on various grounds including the vires of the Act.

After the admission of the writ petition, the respondents have filed their counter and resisted the writ petition alleging that the action taken against

the petitioners was in accordance with law. The seizure of the ornaments was by the authorised Inspector of the Central Excise & Customs, who is

a Gold control officer by virtue of Notification No. 3115 dated 1-9-1968 (Gold Control). It is further submitted that the Act is validly extended to

the State of J & K, which is not ultra vires the constitution, no fundamental or statutory right of the petitioners has been violated so as to grant them

any relief in the writ petition. In their rejoinder affidait, petitioners reiterated their stand and alleged that the issue of corrigendum and the show

cause notice was mala fide, illegal without jurisdiction and arbitrary in nature. It is further alleged that the petitioners were denied a fair opportunity

for making their defence, the findings as to the nature of the ornaments being new on the observation of (he Assistant Collector are purely,

imaginary and unilateral.

Heard the rival arguments at length. Learned Counsel for the respondents was directed on hearing the arguments to produce the record for the

perusal of the court, which has also been produced.

Learned Counsel for the petitioners Mr. T. S. Thakur in his tripartite attack on the orders impugned in the writ petition, firstly submitted that the

provisions of the Act in its application to the State of J & K be struck down being ultra vires the provisions of the constitution. The parliament has

no legislative competence in view of the provisions of the Article 370 to legislate on the subject. Secondly, the very seizure of the ornaments has

been attacked on the plea that the Inspectors, who visited the business premises of the petitioners were not the Gold Control Officers within the

meaning of the Act and were not authorised as such for seizure. In the absence of such an authority the entire proceedings based on such a seizure

are vitiated by error of law & jurisdiction & thirdly, that the entire proceedings taken by respondent No. 3 in gross violation of the directions of the

respondent No. 2 & no opportunity was given to the petitioners to cross-examine the customers, whose statements were recorded behind the

back of the petitioners. Nor the inspection of the seized articles, by which respondent No. 3 has come to the conclusion that the ornaments were

new was ever made in presence of the petitioners. The ornaments were never examined by any expert to arrive at a conclusion adversely drawn

against the petitioners. All the allegations so made before the respondents are not met under the impugned orders, thus the orders are liable to be

set aside, & quashed in the present writ petition.

In his reply arguments by Mr. J. P. Singh, learned Additional Central Government Standing Counsel, it has been pointed out that the validity of

the Act cannot be challenged in view of the authoritative pronouncements of their Lordships of the Apex Court reported in Harakchand

Ratanchand Banthia and Others Vs. Union of India (UOI) and Others, It is pointed out that the Act is enacted by parliament in accordance with

the power conferred on it under Schedule 7 list 1 entry 52, List 3 entry 33 of the constitution of India, which also extends to the State of J & K.

Meeting the second argument, it has been pointed out that the Officers, who seized the ornaments from the premises of the petitioners were duly

authorised as Gold Control officers by virtue of Notification issued under the Act on 1-9-1968 and, therefore, the seizure cannot be either

unauthorised or illegal so as to affect the further proceedings under law. Meeting the last and third argument of the learned Counsel for the

petitioners Mr. J. P. Singh tried to emphasise by referring to the order passed by respondent No. 3 Assistant-Collector that in fact despite giving

several opportunities to the petitioners to appear & adduce the evidence in their defence, they have failed to avail the said opportunity & thus no

grievance can be made of condemnation behind the back of the petitioners.

I will now deal with the arguments in seriatim advanced as noted hereinabove. Taking first the attack on the vires of the Act, it shall have to be

seen in the light of the provisions contained in the constitution. Nothing substantial was pointed out except the provisions of Article 370 to show

that the Act is ultra vires the provisions of the constitution. I find force in the arguments of the learned Counsel for the respondents, when he places

reliance on Harakchand Ratanchand Banthia and Others Vs. Union of India (UOI) and Others, . How the Article 370 debars the parliament to

legislate on the matters in the Union List and the concurrent list is to be pointed out before an enactment is held ultra vires on the said ground? On

this proposition looking to the fact that the Act in question falls in Entry 52 Schedule 7 List I and List 3 Entry 32, the validity of which has been

upheld by their lordships of the Apex Court in the above noted decision, i.e. Harakchand Ratanchand Banthia and Others Vs. Union of India

(UOI) and Others, , I do not find that any case is made out to hold the Act as ultra vires the provisions of the Constitution. The first limb of the

argument, therefore, fails.

Secondly it has been strenuously argued that the search & seizure by Inspectors of Customs & Central Excise, who visited the business

premises of the petitioners was without jurisdiction as they were not the Gold Control Officers within the meaning of Section 4 of the Act. The

notification relied on by learned Counsel for the respondents has never seen the light of the day. It was neither placed before the court nor forms

part of the record produced by the respondents. Even otherwise it has been pointed out that by mere authorisation for inspection, an inspector

does not become a Gold Control Officer within the meaning of Section 4 of the Act. In order to appreciate this argument in the Book Commentary

on the Gold (Control) Act. Notification No. 3115 relied on by the respondents issued on September 1, 1968 and published in the Gazette of India

Extraordinary, Part II, Section 3(ii), dated 1-9-1968 at page 93, which runs as follows:

S.O. No. 3115.- In exercise of the powers conferred by Sub-section (2) of Section 4 of the Gold (Control) Act, 1968, (45 of 1968), the Central

Government hereby appoints all officers of the Central Excise of and above the rank of Sub-Inspectors & all officers of Customs of and above the

rank of preventive Officers as Gold Control Officers for the purpose of enforcing the provisions of the said Act.

With the abovesaid Notification in hand it is to be scrutinised in the light of the provisions of Section 4 of the Act Sub-section (2) of Section 4

empowers the Central Government to appoint as many persons as it thinks fit to be Gold Control Officers for the purpose of enforcing the

provisions of the Act. In order to exercise the powers of Gold Control Officer, it is essential that basically there should be an appointment by the

Central Government under the above noted provisions & the officer concerned must hold that office for the purpose of enforcing the provisions of

the Act. In the instant case it is no doubt true that by the said Notification the Inspectors above the rank of Sub-Inspectors of the Central Excise

and all officers of the Customs above the rank of preventive Officers have been so appointed as Gold Control Officers for the purpose of

enforcing the provisions of the said Act. Their powers cannot be isolated for the purpose of enforcing the provisions of the Act as the words of

Sub-section (2) of Section 4 denotes that the Central Government may appoint as many persons as it thinks fit to be Gold Control Officers for the

purpose of enforcing the provisions of the Act. On a careful consideration of the provisions of the Act in the light of the admitted position that the

officers who visited, the business premises of the petitioners were holding the ranks of Central Excise Intelligence and Preventive Officers; they

were undoubtedly above the rank of Sub-Inspectors & therefore; the seizure made u/s 68 of the Act cannot be said to be by an unauthorised

Officer or illegal in any manner. I am, therefore, of the opinion that the second attack made by learned Counsel for the petitioners on the seizure of

the ornaments though attractive but is devoid of any substance.

Adverting to the last and third limb of the arguments, which pertains to the serious attacks on the impugned orders on the violation of the

principles of natural justice is to be scrutinised from the record. There is no dispute about the fact that the appeal preferred by the petitioners to the

Collector-Respondent No. 2 against the first order passed on April 30, 1974 by respondent No. 3 imposed the penalty of Rs. 1,000/- only and

the confiscation of the ornaments, which was accepted by the Collector by his order dated December 23, 1975 and the case was remanded back

to the Assistant Collector Respondent No. 3 for conducting the de novo trial. Pursuant to the receipt of the file, respondent No. 3 by his notice

dated March 22, 1976 added certain more charges, which were not available to him at the time when the initial notice was issued. Because the

notice itself indicates and styled as Corrigendum to the notice issued earlier on February 12, 1974 by adding paragraph 6 adding the charge of

contravention of identification of customers Rules, 1969. The earlier notice shows the contravention of sections 8, 33, 36 & 55 of the Act. Section

8 places restrictions regarding acquisition, possession & disposal of gold, Section 33 places a bar on the dealer not to keep on any business

premises the gold which is not a part of the stock-in-trade, Section 38 provides for prohibition, regarding possession of gold not included in any

return and Section 55 pertains to the Accounts and Returns. It is undoubtedly true that in the Corrigendum one more violation has been added that

of the contravention of identification of Customers Rules, 1969. It is a departure from the notice issued earlier. The Collector never directed for

addition of any more grounds except the one based on the notice initially issued for which he directed for de novo action. I therefore, find force in

the arguments advanced by learned Counsel for the petitioners with that objection that the learned Assistant Collector Respondent No. 3

exceeded the notice initially issued, for which he was not authorised by the Collector.

The order impugned passed by the learned Assistant Collector-Re Collector-Respondent No. 3 after the remand dated September 29, 1976

by maintaining the order of confiscation and enhancing the penalty of Rs. 5,000/- as against Rs. 1,000/- imposed in the earlier order is attacked on

the variety of reasons. On a close scrutiny of the record produced by the learned Counsel for the respondents, it transpires that the statements of

the customers recorded by the Assistant-Collector prior to the order of remand remained as they are & no opportunity appears to have been given

to the petitioners to cross-examine those witnesses nor their statements were recorded in presence of the petitioners. The condition of the file

shows that ,no regular proceedings were kept on record so as to find out what steps were taken by the Assistant Collector for conducting the de

novo trial in terms of the remand order. It will not be proper for me in the writ petition nor it is the jurisdiction of this Court to re-appreciate the

evidence, but the fact remains that if the quasi-judicial authority acts beyond jurisdiction in drawing its own conclusion without any basis, such

conclusions become arbitrary & assumptive. The learned Assistant Collector while dealing with the statements of the witnesses-the customers to

whom the seized articles belong have based merely on assumptions, conjectures & surmises & beyond the course of common human conduct In

proceedings of such a nature where the penal consequences accrued and a party is held liable for penalty, the procedural lapses come to the

rescue of the party concerned and the benefit goes to him and not to the department. It was an imperative duty of the learned collector to allow the

petitioners to cross-examine those witnesses, so that the right of the petitioners to defend themselves would not have been violated

As regards the visual examination of the seized gold ornaments by the Assistant Collector himself, it is pointed out that the same is neither done

in presence of the petitioners nor any examination of the articles was made after notice to the petitioners by any expert. In doing the visual

examination and finding them to be new ornaments & criticising the statements of the witnesses to whom the articles belong makes the learned

Assistant Collector to be the Judge of his own cause, who is a prosecutor himself & amounts to condemnation of the petitioners behind their back

violating the principles of natural justice. All this shows that the action taken by respondent No. 3 is arbitrary, assumptive and vindictive in nature. If

the violation of the provisions of the Act alleged against the petitioners is not found proved according to the standard prescribed for the criminal

cases, it is the prosecution, who has to suffer and not the petitioners. Merely harping on the fact of right of hearing does not fulfill the gaps of the

prosecution for conduct of the trial without giving opportunity to the petitioners of making their defence and getting the opportunity of cross-

examining the witnesses or to remain present at the time of the visual examination of the seized articles as to their age. In the absence of any such

procedure the rule of Audi Alteram partem stands violated and all such proceedings as to the confiscation of ornaments and imposition of penalty

are vitiated by error of law and jurisdiction liable to be quashed in the writ jurisdiction by the High Court.

The learned Collector in appeal while upholding the order passed by respondent No. 3 in his order dated April 7, 1977 has not taken into

account all the grounds so raised before him and the Central Government too while confirming the order in revision by its order dated May 16,

1981 appears to have ignored the procedural lapses pointed out hereinabove making the orders impugned as illegal and without jurisdiction. It is

now well settled law that if the principles of natural justice have been violated even by quasi-judicial authority, the order so passed are liable to be

interferred with in writ jurisdiction. 1, therefore, find considerable force in the last and third argument advanced by learned Counsel for the

petitioners and the petition deserves to be allowed on that ground alone and the petitioners are entitled to get back the amount of Rs. 7,500/- paid

towards the confiscation of the ornaments and Rs. 2,000/- paid towards the penalty imposed under the order impugned passed by respondent No.

1.

In the result the petition succeeds, which is hereby allowed. The orders passed by respondent No. 1 on May 16, 1981 and those passed by

Collector-Respondent No. 2 on April 17, 1977 and Respondent No. 3 on September 29, 1976 are hereby quashed. Respondents are directed to

refund the amount of Rs. 9,500/- deposited by the petitioners in compliance of the order passed by the Central Government on May 16, 1981.

Parties under the circumstances are left to bear their own costs. It also disposes of C.M.P. No. 734 of 1981. The record be given back to Mr. J.

P. Singh, Counsel for the respondents.